Proposed Rule to Increase Fraud and Abuse Penalties

On May 12, 2014, the Department of Health and Human Services (HHS) issued a Proposed Rule that would significantly enhance the Office of the Inspector General’s (OIG) authority to impose civil money penalties (CMPs).  The OIG has the ability to impose CMPs on providers who participate in Federal health care programs for various activities related to health care fraud, patient abuse, and other activities.  The Proposed Rule would incorporate new CMP authorities, clarify previously existing authorities and reorganize and consolidate regulations on CMPs, assessments and exclusions.

You may comment on this Proposed Rule up through July 11, 2014.  The best way to comment is by submitting comments through the Federal eRulemaking Portal at:  Commenters should reference file code OIG–403–P. 

Summary of the Proposed Rule

The Patient Protection and Affordable Care Act (ACA) significantly expanded the OIG's authority to protect Federal health care programs from fraud and abuse.  To implement the changes made by the ACA related to CMPs, the OIG proposed amending its regulations to permit the OIG to impose CMPs for:

  1. Failing to grant OIG timely access to records, upon reasonable request, for the purpose of audits, investigations, evaluations or other OIG statutory functions (up to $15,000 per day);
  2. Ordering or prescribing items or services payable by Federal health care programs while excluded, when the person knows or should know that a claim for the item or service will be made under such program ($10,000 per violation);
  3. Making false statements, omissions or misrepresentations in an enrollment application ($50,000 for each false statement, omission or misrepresentation);
  4. Failing to report and return an overpayment within 60 days after identifying the overpayment ($10,000 per day for each overpayment); and
  5. Making or using a false record or statement that is material to a false or fraudulent claim ($50,000 for each false record or statement).

The proposed CMP maximum amounts apply when there are no aggravating circumstances for the five new types of misconduct. 

One of the biggest concerns is the CMP provision proposed for failing to report and return an overpayment within the 60-day deadline after identifying an overpayment.  The ACA did not prescribe a specific penalty amount for this type of conduct, but instead provides for imposition of the default penalty amount in the Civil Money Penalty Law—which is up to $10,000 for each item (making no mention of a “per day” penalty).  The government is proposing that this $10,000 maximum CMP may be imposed for each claim for which an overpayment is identified for each day after expiration of the 60-day deadline that the overpayment is not reported and returned.  HHS is soliciting comments on this provision. 

The ACA already made the retention of an overpayment beyond 60 days a potential Federal False Claims Act (FCA) violation, punishable by hefty penalties of up to $11,000 per claim and treble damages.  But, in order to be subject to FCA penalties, a party must bring a court action against a provider.  If the Proposed Rule is adopted, the government wouldn’t have to go through the process of filing an FCA action.  The OIG could simply impose the fine on any ambulance service that identified and overpayment and failed to return it within 60 days. 

The Proposed Rule would also:

  • Increase the claims mitigating factor in imposing CMPs and exclusion periods from $1,000 to $5,000 to reflect that the OIG considers conduct resulting in more than $5,000 in Federal health care program loss to be more serious misconduct, and specify $15,000 as the claims-aggravating factor for consideration of larger CMPs and longer exclusion periods;
  • Clarify when assessments may be made against a Medicare Advantage Plan;
  • Define terms such as “knowingly,”  material,” “reasonable request” and “should know or should have known” for purposes of CMPs;
  • Distinguish between how assessments and CMPs will be determined when 1) items and services provided by an excluded person are separately billed to Federal health care programs, and 2) when items and services provided by an excluded person are not separately billed to Federal health care programs but are a component of or contribute to an item or service for which a claim for reimbursement may be made to a Federal health care program;
  • Provide for consideration of timely and appropriate corrective action as a mitigating factor only if the misconduct is disclosed to the OIG through its Self-Disclosure Protocol;
  • Revise, and consolidate into one section, the aggravating factors to generally be considered in determining an exclusion period and the amount of penalties and assessments for violations.